June 1 (Bloomberg) -- Global liquefied natural gas demand will prove strong enough to support development of proposed LNG projects in Australia’s Queensland state, a ConocoPhillips executive said.

“Demand will be there going forward,” Ryan Lance, senior vice president for international exploration and production at the second-largest U.S. oil refiner, said in Darwin today. “LNG will be a fuel for the future” as pressure grows on countries to reduce emissions of harmful greenhouse gases, he said.

Conoco’s venture with Origin Energy Ltd. is the biggest of the four most-advanced projects aiming to convert gas extracted from coal seams into LNG near the central Queensland city of Gladstone. The partners target the first exports in 2014. There are some 10 LNG projects in Australia and Papua New Guinea seeking to tap a forecast increase in demand in north Asia for cleaner fuels, even as the global recession temporarily curbs growth in energy use.

LNG “supply is there, the demand is not there,” Fereidun Fesharaki, head of Honolulu-based consultant FACTS Global Energy, said at the Australian Petroleum Production and Exploration Association conference in Darwin. “Not all coal seam gas projects will go ahead,” he told reporters after the speech.

China, the second-largest energy-consuming nation, is building more than 10 LNG terminals on its eastern coast to meet a government target of doubling the use of the cleaner-burning fuel. BG Group Plc and Santos Ltd. are among companies with stakes in rival ventures aiming to turn gas extracted from coal seams in Queensland into LNG. Australia’s coal-seam gas industry attracted about $22 billion in investment last year.

‘Lull’ in Demand

There will be “a bit of a lull” in demand, although “long term we think it is a good business to be in,” Lance said at the APPEA conference.

Some “natural collaboration that will make sense” is likely among rival LNG ventures in Queensland, Lance said. Conoco is looking to work with other coal-seam gas developers in the state from the “upstream, downstream and midstream side of the business,” Lance said.

Santos, which has formed a with Petroliam Nasional Bhd., welcomes “collaborative discussions” with BG Group Plc and the Origin-ConocoPhillips partnership on developing Queensland coal- seam gas reserves, the Financial Times reported, citing Chief Executive Officer David Knox.

Santos may sell a further minority interest in the Gladstone venture in combination with a fuel-sales contract, the company said May 11. Marketing discussions with a range of Asian LNG buyers are at an advanced stage, Rick Wilkinson, president of Gladstone LNG and Santos’s Queensland assets, said May 15.

‘Buyers’ Market’

“It is a buyers’ market right now” for LNG, International Energy Agency Deputy Executive Director Richard Jones said in Darwin today. “The increase in non-conventional gas production in the United States has changed the demand situation substantially for LNG.”

LNG is natural gas chilled to liquid form, reducing it to one-six-hundredth of its original volume at minus 161 degrees Celsius (minus 258 degrees Fahrenheit) for transportation by ships to destinations not connected by pipeline.

Coal-seam gas mostly comprises methane on the surface of coal. The gas can be extracted when pressure on the seams is reduced, usually by removing water.

To contact the reporter on this story: Ben Sharples in Melbourne bsharples@bloomberg.net

Last Updated: June 1, 2009 02:06 EDT